Are pre-Christmas sales really such a bargain?

There was a time when we shopped for the festive season keeping some powder dry for the Boxing Day sales. But in recent years the US tradition of ‘Black Friday’ sales, which kick off on 26 November, have arrived in Australia, meaning the spend-fest gets underway a whole lot sooner.

Comparison site Finder estimates almost one in two Australians will fork out cash on pre-Christmas sales, with a whopping $3.8 billion expected to be spent over the Black Friday/Cyber Monday weekend.

But before going ham for the bargains, it’s worth thinking about what’s really on offer. Now’s the time to check out regular retail prices so you know exactly how much of a genuine discount you’re getting. Compare prices with websites like Google Shopping or price comparison apps like Shopular and ShopSavvy.

If you’re shopping online, allow for freight costs. And if you’re paying with a credit card on an overseas website, be aware that foreign exchange fees can be worth 3% of the transaction. These fees coupled with freight can quickly take the shine off a bargain.

It’s also worth watching for pricing gimmicks that encourage us to think we’re getting a better deal than we really are.

It’s a no-brainer for instance, that a product selling for $1.99 is more attractive than one priced at $2.00. But a study by the University of Chicago found shoppers pay a disproportionate amount of attention to the leftmost digits in prices when it comes to deciding what’s a bargain, and what’s overpriced.

In one experiment, participants were given a choice of two pens, one priced at $2.00 and the other at $3.99. Almost half the participants chose the higher-priced pen. It’s a mind trick that scientists call ‘the left digit effect’ – and the study found it also impacts our decisions when shopping for higher value purchases, making it easy to spend more than necessary.

As the hype around pre-Christmas sales reaches fever pitch, it’s always worth remembering that a purchase isn’t a bargain if you don’t really need the item. With this in mind, make a list of buys you need and stick to it.

If you’re unsure whether Aunt Ethel will be thrilled to receive that heavily discounted angle grinder you picked up (hot tip: she probably won't), it can pay to stick to tried and tested Christmas gifts. It may not mean scoring a massive bargain, but it won’t see you (or Aunt Ethel) queueing for a refund on Boxing Day either.

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.